From 3 December 2018, businesses who sell either B2B or B2C within the EU will have to comply with the EU Geo-Blocking Regulation. The Regulation will have both economic and procedural implications for any trader which sells to EU customers because it requires that customers anywhere in the EU be allowed to purchase on the same conditions as customers anywhere else in the EU. A trader can still put different prices on websites aimed at different territories, but customers must not be confined to purchasing from websites aimed at a particular territory.

The three forms of prohibited behaviour

The Regulation prohibits the following discriminatory behaviours, where based on a customer’s nationality, place of residence or place of establishment:

Geo-blocking – a trader blocking or limiting a customer’s access to its online interface (such as a website or app), or automatically redirecting the customer to a different online interface, without its express consent. For example, this means that a UK user must not be automatically redirected to a non-UK version of the website they are visiting. Geo-blocking is permitted where it is necessary to comply with EU or Member State law, but where this is the case, a clear and specific explanation must be provided.

Offering goods or services on different conditions in different Member States. This applies to any goods which are offered in a Member State (whether delivered or made available for collection) and services, which may include electronically supplied services such as cloud or other services offered in a physical location where the trader operates (such as hiring a car).However, a trader can deny customers access to its goods or services where required under EU or Member State law.

Discriminating between different means of paymentwhere:

Payments are made electronically by bank transfer, direct debit or card-based payment within the same brand and category (i.e. debit or credit card);

Authentication requirements are fulfilled; and

The payments are in a currency that the trader accepts.

What does this mean?

By way of example, with effect from 3 December absent a legal justification, a trader based in the UK will not be able to prevent a German customer (identified using technical means, such as an IP address, or otherwise) from accessing its UK website, and purchasing the trader’s goods/services on the same terms as a UK customer (including the price). This does not mean that, if the trader has more than one website, the price offered on each of them has to be the same. Differential pricing, special offers and promotions from Member State to Member State will continue to be permissible, provided that those terms are available to all EU customers on a non-discriminatory basis.

In terms of delivery options, the trader in this example could offer to deliver goods in the UK and Ireland only. Whilst the Regulation requires a trader to sell cross-border in the EU, it does not impose an obligation to deliver cross-border. The German customer would, however, have to be offered the option of collecting the goods from the trader’s premises or arranging delivery to their German address themselves.

The trader in question would not be able to discriminate based on the Member State in which the customer’s credit card was issued, if it accepted payment by that brand of credit card in another Member State. However, it would not be required to accept a credit card simply because it accepted debit cards of the same brand.

Why was this Regulation introduced?

The objective of the Regulation is to encourage cross-border commerce within the EU Single Market, especially e-commerce. The Regulation gives all customers in the EU the same rights to access a trader’s goods/services and on the same terms, irrespective of their location. EU customers will be able to shop around (potentially across the entire EU) to access the best prices and sales conditions.

Who will be affected?

The Regulation applies to all traders who make cross-border sales of goods or services to EU customers via online, offline or omni-channel means. ‘Customers’ in this context includes both consumers and corporate customers, provided in either case they are buying the goods/services for end use. The Regulation will, therefore, be relevant in the context of both B2B and B2C contracts, but not in the case of arrangements between manufacturers and their wholesale distributors.

Significantly, the Regulation has extra-territorial effect. Traders based in the EU and traders established outside the EU (for example, in the US) must be compliant, provided in each case that they are selling to EU customers.

Scope of the Regulation

Some goods and services are excluded from the scope of the Regulation, including transport services, retail financial services and audio-visual services. Services linked to non-audio-visual copyrighted content (such as online television, music streaming and e-books) also fall outside the scope of the Regulation’s prohibition on offering different conditions of access to goods or services. Other goods and services, including electronically supplied services such as cloud services, will be within scope.

Enforcement

Enforcement of the Regulation will be dealt with at national level. The enforcement authority in the UK will be the Competition and Markets Authority. It will be able to apply for court orders against, or accept undertakings from, traders requiring them to cease infringing behaviour. Customers who suffer loss as a result of a trader breaking the Regulation will be able to bring a claim directly against that trader in relation to that loss. Authorities in other Member States will have the power to impose significant fines on traders who infringe the rules.

How should traders respond?

Traders within the scope of the Regulations should take steps to assess whether their sales processes and trading terms and conditions include discriminatory elements prohibited by the Regulations, and revise them accordingly. Can all EU customers access their website and complete an order? Do the same terms and conditions apply regardless of the customer’s location? Traders should carry out this audit without delay with a view to becoming Regulation compliant by 3 December, or as soon as possible thereafter.

How will Brexit affect this?

The UK Government recently issued a technical notice on how geo-blocking would be dealt with in the UK in the event of a ‘no deal’ Brexit scenario. In summary, it confirmed that UK customers would no longer benefit from the Regulation when buying from EU traders. However, UK traders selling into the EU would still be bound to comply with the Regulation in their dealings with customers located in the remaining 27 EU Member States.

If the UK exits the EU under the terms of the draft Withdrawal Agreement published on 14 November 2018, the Regulation will continue to apply in the UK until the end of the transition period, i.e., until 31 December 2020.

Get in touch

If you need advice on how to ensure business is compliant with the Geo-blocking Regulation, get in touch. Our e-commerce team has experience of helping online businesses in the EU and beyond comply with EU regulation.